FedEx Establishes Direct Presence in Nigeria to Support Customers with International TradeRead more Open Society Foundations (OSF) Award $1.1 Million Grant to Afrobarometer to Spur Future GrowthRead more The annual Global Impact Conference 2022 brings together visionary business leaders to revolutionize educational systems and inspire collaborative actionRead more APO Group announces content partnership with Pan-African broadcaster VoxAfricaRead more MainOne, an Equinix Company’s MDXi Appolonia Achieves Tier III Constructed Facility certification (TCCF), Now Most Certified Data Center in GhanaRead more United Nations High Commissioner for Refugees (UNHCR) warns rising tide of hunger, insecurity, and underfunding worsening gender-based violence risksRead more The Royal Thai Embassy presents the cultures of Thailand at the Association of Southeast Asian Nations (ASEAN) Festival in KenyaRead more Climate change is the biggest global threat, young people in Africa and Europe tell European Investment Bank (EIB), Debating Africa and Debating EuropeRead more $2 million in prizes awarded at Conference of the Parties (COP27) to African youth-led businessesRead more Africa and Europe’s top business and public sector leaders gather to chart Africa’s economic rebirthRead more

Japan to approve $200 bn budget to tackle inflation

show caption
The yen has lost a fifth of its value this year./AFP
Print Friendly and PDF

Oct 28, 2022 - 09:33 AM

TOKYO, JAPAN — Japan’s cabinet was expected to approve an extra budget worth $200 billion Friday to cushion the economy from the weak yen and inflation, though the central bank refused to budge from the ultra-loose policy that has hammered the currency.

Prime Minister Fumio Kishida said the government would “seek swift approval” of a 29.1 trillion yen budget aimed at encouraging wage growth and supporting households with soaring energy bills.

Total fiscal spending on the stimulus measures could be as high as 39 trillion yen, according to the Nikkei business daily and other major Japanese media.

That figure could rise to 71.6 trillion yen when private-sector investments that ministers hope will also be made are taken into account, the reports said.

Prices are rising in Japan at their fastest rate in eight years, although the three-percent inflation rate remains well below the sky-high levels seen in the United States and elsewhere.

The yen has also lost more than a fifth of its value against the dollar this year, with one dollar fetching 146 yen on Friday.

Japan spent nearly $20 billion in September in an effort to curb the yen’s slide, and further expensive government interventions have reportedly taken place in recent days.

The yen’s steep falls have been driven by the widening gap between the monetary policies of the US and Japanese central banks — with the Bank of Japan keeping rates ultra-low to encourage sustainable growth, while the Federal Reserve ramps them up.

Following a two-day policy meeting, the BoJ said it would continue to keep its easy policy, defying growing pressure to tweak its strategy as the yen slides.

Bank Governor Haruhiko Kuroda told reporters officials would stick to their guns until prices rise “in a sustainable manner”, adding there would be no change “any time soon”.

Stability sought 

Kuroda declined to comment on suspected currency interventions in the past week, which the finance ministry has not confirmed.

But “having said that, it is extremely important that (forex rates) reflect economic fundamentals, and move in a stable manner”, he added.

“The recent depreciation of the yen is rapid and unilateral,” which is “negative for the Japanese economy”, Kuroda said.

Japan — which has one of the world’s highest debt-to-GDP ratios — has already injected hundreds of billions of dollars into its economy over the past two years to support recovery from the Covid-19 pandemic.

Friday’s spending package is expected to include measures to encourage wage growth and support households with energy bills, which have spiked since Russia’s invasion of Ukraine.

Ahead of the BoJ meeting, UBS economists Masamichi Adachi and Go Kurihara said that a mix of continued easing by the central bank and the government’s stimulus measures would be “optimal”.

That is because Japan’s inflation is not demand-driven, but largely down to soaring energy costs, they explained in a commentary.

This view was echoed by Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“Japan’s economy faces weak demand due to price rises, in contrast to the United States, where demand is strong, with the Fed trying to cool down inflation,” he told AFP.

“It’s impossible that Japan would hike rates to curb inflation, for this reason.”

MAORANDCITIES.COM uses both Facebook and Disqus comment systems to make it easier for you to contribute. We encourage all readers to share their views on our articles and blog posts. All comments should be relevant to the topic. By posting, you agree to our Privacy Policy. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, name-calling, foul language or other inappropriate behavior. Please keep your comments relevant and respectful. By leaving the ‘Post to Facebook’ box selected – when using Facebook comment system – your comment will be published to your Facebook profile in addition to the space below. If you encounter a comment that is abusive, click the “X” in the upper right corner of the Facebook comment box to report spam or abuse. You can also email us.